India’s Reliance Capital looks to raise $14.3b via stake sale to pare debt

Reliance Asset Management will soon be renamed Reliance Nippon Life Asset Management, subject to approvals from relevant authorities. Photo: Abhijit Bhatlekar/Mint

Reliance Capital Ltd (R-Cap) has drawn up plans to raise up to ₹10,000 crore ($1.43 billion) through stake sales as the diversified financial services company seeks to cut its debt amid a string of rating downgrades.

The Anil Ambani group firm plans to sell up to a 51% stake each in its wholly owned non-banking financial companies—Reliance Home Finance and Reliance Commercial Finance as well as in two media companies—Codemasters and Prime Focus, said Amit Bapna, R-Cap group chief financial officer.

In addition, it plans to divest as much as a 49% stake in two wholly owned insurance firms—Reliance Insurance and Reliance General Insurance, Bapna said.

He said the proposed deals are expected to infuse fresh equity in the company and help reduce the debt at R-Cap. The company had a consolidated debt of ₹49,290 crore ($7.06 billion) as of 30 September.

R-Cap has not appointed any investment bank but is in talks with two-three potential buyers, Bapna said, adding the disinvestments will be in addition to the on-going sale of a 43% stake in Reliance Nippon Asset Management Co., which is expected to close in September.

It, however, remains to be seen whether R-Cap manages to seal the deals, given the distressed situation in the NBFC sector. “Agreed the NBFC crisis is continuing, but we are ceding management control which is attractive to buyers and we are seeing reasonable interest. In NBFCs, we are looking to sell a 51% stake and in insurance, it could be up to 49%. We are willing to remain just a financial investor,” Bapna said.

Rating agencies CARE Ratings and Icra downgraded papers issued by Reliance Commercial Finance and Reliance Home Finance on 26 April. Icra also downgraded commercial paper issued by R-Cap. These rating actions raised questions on the group’s liquidity situation and ability to service debt. Bapna claims there is a “temporary delay in meeting repayments to banks for ₹1,000 crore due to a timing mismatch.”

“The others papers which have been downgraded are nowhere near their maturity,” he said.

“We have short-term and long-term measures to tackle the current concerns. These concerns are not specific to Reliance alone but the entire NBFC sector which is struggling due to lack of bank funding,” said Ravindra Rao, director, Reliance Commercial Finance.

On 26 April, CARE downgraded bank facilities issued by Reliance Commercial from BBB+ to D. It also downgraded debt of ₹5,000-crore of Reliance Commercial Finance to C from BBB+. The agency cited rescheduling of non-convertible debentures and delay in repaying bank loan facilities as the rationale for its action.

“Even here the delay is not on interest but the principal,” said Rao, adding that the liquidity concerns are “short term” which the group is trying to resolve through securitisation of its asset portfolio.

“In the short term, we will securitize our portfolio and in the long term, we are focusing on 51% stake sale, this will infuse liquidity into the companies,” Rao said.

Bapna also said the group is seeking a review of the rating actions. “Any rating action just based on liquidity without looking at the fundamentals of the companies cannot be fair. The agencies also failed to consider that a stake sale process is ongoing. They could have waited for some more time before the downgrades,” he said. The management of R-Cap is in touch with seven asset management companies which have an exposure to these papers across 67 schemes.

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India: Billionloans raises $1m seed funding from Reliance Capital

This article was first published on livemint.com.

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.